I was probably a teenager when I first heard J. Reuben Clark’s classic explanation of the power interest has on those in debt. I remember the uneasy feeling I had. I caught a glimpse of the bondage of debt. I wanted to do whatever I could to avoid having interest as my constant companion.
“Interest never sleeps nor sickens nor dies; it never goes to the hospital; it works on Sundays and holidays; it never takes a vacation. … Once in debt, interest is your companion every minute of the day and night; you cannot shun it or slip away from it; you cannot dismiss it; it yields neither to entreaties, demands, or orders; and whenever you get in its way or cross its course or fail to meet its demands, it crushes you.”
I also remember learning, at about the same time, the principle “Those who understand interest earn it. Those who don’t pay it.” It was clear to me which side of interest I wanted to be on.
Still, years passed and life happened. We knew exactly what we were doing when we chose to go into debt (thought there are still things I would have done differently). We don’t like this debt thing very much, so we’re trying to get out of it as fast as we can. It will be refreshing to be just earning interest and not paying it anymore!
Kids Get It
Our young children understand interest. We are open with them about our debt situation and we use it to teach them about debt. They know that interest makes the amount of money that we have to pay grow. They know that the longer it takes us to pay back Daddy’s law school loans, the more we will have to pay. They know that if we pay the loans quickly we will pay much less.
The other day we were talking about interest at the dinner table. My kids were asking how banks make money. (It was mainly the 5- and 6-year-old, the nearly 3-year-old was pretty involved in his dinner.) We explained that people let the bank hold their money because the bank pays them a little bit of interest. Then the bank gives their money to other people to borrow. When people borrow money from the bank, the bank charges the borrowers interest. The amount of interest the borrowers pay the bank is much higher than the amount of interest that the bank pays to people who let the the bank use their money, so the bank keeps the difference.
This was the first time we had talked much about the good side of interest. The kids picked up quickly. It was obvious to them that we would rather let the bank use our money and pay us interest, than borrow from the bank and have to pay them interest.
- When did you first grasp the concept of earning interest? Of paying interest?
- Do your kids understand both sides of interest?
- Have you felt the crushing and enslaving power of interest, as Clark describes?
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